Alcoa stock tumbles as profit, revenue miss expectations

Metals company Alcoa Inc (AA.N), weeks away from splitting into two, on Tuesday reported a quarterly profit that missed estimates and lowered its revenue forecast for the unit serving the auto and aerospace sectors, sending shares down 10 percent.

Quarterly revenue fell in the business making products for the automotive and aerospace industries, due partly to delays with new jet aircraft engines and pricing pressure, Alcoa said.

It posted a higher third-quarter profit as cost-cutting offset lower revenue from curtailed or closed smelting operations and falling prices.

"We are performing well despite the low pricing environment ... demanding conditions on the commodity side as well as aero industry teething problems," Alcoa Chief Executive Officer Klaus Kleinfeld told Reuters. "We have concentrated on what we can influence and you see our strong resilience."

Alcoa will split into two entities ahead of the market opening on Nov. 1. The first company, keeping the Alcoa name, will focus on the traditional smelting business. The other, Arconic, will specialise in higher-end aluminium and titanium alloys for the automotive, aerospace and construction industries.

The company lowered its full-year 2016 revenue targets across all areas of the business, which it said was due to near-term challenges, particularly in the aerospace industry.

The delay in building new, more energy-efficient jet engines stems from the need to test all the metal parts involved, which is taking longer than planned and delaying production.

Charles Bradford of Bradford Research said Alcoa has done "quite well on the cost side" in the third quarter, adding that its problems were largely external, from low alumina prices to the delay in aircraft production.

"The jet engine issue is nothing to do with them," Bradford said. "Demand for those engines is strong, the problem is actually making them."

Alcoa said global automotive production will rise between 1 percent and 4 percent in 2016 and that aircraft deliveries will be flat to up 3 percent in 2016.

Its quarterly results came as benchmark aluminium prices CMAL3 hit two-month highs on Tuesday before retreating on oversupply concerns and rising output by top producer China.

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